2014 Tax Season: 5 Steps to Make Next Year’s Taxes Suck Less
Can you believe it? 2014 is right around the corner. Ha! It’ll be here in no time, I promise. Right after all this cold weather, then hot weather, then cold weather again, it will be 2014. And then your taxes returns will sneak up on you, much like they’re about to this year. Here are a couple tips to make this year THE year you finally get your tax-house in order and make life super simple in 2014.
1) Stop by Walmart, Target, or Office Max and pick up a little notebook for your car. Most people who deduct mileage against their taxes for business and medical purposes do so at their own peril. The IRS requires “contemporaneous” notes regarding your mileage. The old method of “what was my odometer on Jan 1 and Dec 31” isn’t going to work. Remember the “W’s” from elementary school? You need to do the same thing for IRS notes:
- Who you went to see,
- What you saw them for,
- When you went,
- Where you went,
- Why you went,
- and How you got there (and how many miles it was).
Remember, for mileage to count, it has to originate and end at your primary work location, so always start work trips from the office! The key here is execution – every time you start the car, take out your notebook and make a note. Tax documentation solved!
2) Buy a big manila envelopes for medical expenses. Not only may you have to verify expenses for your FSA or HSA, but if you keep track of bills and out-of-pocket costs, you may be able to deduct medical expenses on your Schedule A next year. Again, 5 W’s apply, but the original bills from your medical provider will suffice.
3) Since tax rates are essentially unknown year-to-year (thank you, Congress), the one thing you can’t beat is tax-free income. Take a look at your current investment portfolio – could you do better with some tax-free strategies? There are dozens (or more) of investments that offer tax-free dividends that have long-term track records. Consider moving a portion of your non-qualified investment portfolio into tax-free positions. While you’re at it, open/contribute to a Roth IRA. You’ve been saying, “Someday….” long enough. Today’s the day.
4) If you own a business and have the nasty habit of co-mingling your personal and business monies, make this the year you stop doing that. Open a new business account, get a credit card for business use only and stick to it. Sure, it may be a hassle to transfer money back and forth, but your books will be cleaner at the end.
5) Finally, make this the year you find professional help. Just the other day, I told my wife that if some enterprising individual approached me with the offer to do my bookkeeping part-time, I’d jump at that in a heartbeat. Unless you’re a bookkeeper, that’s not your main business. Get out of the business of bookkeeping. Hire it out, and use that time to be more productive in your own line of work.
All of us detest tax time. Taking a few minutes today to set up 2014 will make your life a bazillion times better this time next year.
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